This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

Gates' Non-Storm Stirs Tech Contrarians

Timing is everything when it comes to trading stocks and, apparently, even pontificating about them.

In September 1999, Microsoft's (MSFT - Get Report) then-president, Steve Ballmer, told a conference of business journalists that "there is such an overvaluation of technology stocks that it is absurd." The market's violent reaction, while short-lived and prior to a huge rally, was arguably a harbinger of the sector's 2000-02 misery.

Fast forward to this week in Seattle, where Microsoft co-founder Bill Gates addressed the same conference -- the annual meeting of the Society of American Business Editors and Writers. Recalling Ballmer's comments in 1999, Gates was asked for his current view of tech stock valuations. His response:

Well, I think any statement about stock prices is always suspect unless it's made by Warren Buffett. But I would say that there is as much overvaluation today as there is undervaluation. People still love technology companies. People still have the dream, and there are big multiples.

We're nowhere near where we were in 1999, but in no way has there been a swing in the other direction, to a measurable degree.

Notably, Gates didn't specifically mention Microsoft and, typically, was more open to interpretation than Ballmer. Still, it seemed clear to me that he believes tech stocks, in general, remain overvalued.

Perhaps more interesting than Gates' comments -- made after the close Monday -- was the seeming absence of market reaction to, or media chatter about, them. Clearly, we're not in Kansas, circa 1999, anymore.

The relative and absolute lack of reaction to Gates' view on tech stocks says something about the sector's fall from grace, if not our collective consciousness. Imagine the reaction if Gates had said residential real estate is overvalued.

The lack of response to Gates' comments and the sense tech stocks are no longer an acceptable topic of conversation in polite society might prompt a contrarian to say it's a bullish sign that people don't care about tech or have given up on the sector.

Clearly, there is a lot of skepticism about technology stocks, as evidenced by the steady rise of short interest in over-the-counter stocks this year and the uneven trend of inflows into growth mutual funds. That's understandable given the sector's recent performance. Despite rallying the past four sessions, including Wednesday's 1.5% advance, the Nasdaq Composite remains down 9.8% year to date and is the worst-performing of the major averages.

1 of 3

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Try it NOW
Only $9.95
Try it NOW
14-Days Free
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
SYM TRADE IT LAST %CHG
AMZN $370.56 0.87%
BRCM $42.91 1.82%
EMC $25.17 -2.48%
GOOG $548.34 -1.23%
INTC $32.00 6.38%

Markets

DOW 17,712.66 +34.43 0.19%
S&P 500 2,061.02 +4.87 0.24%
NASDAQ 4,891.2190 +27.8570 0.57%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs